What will the Democrats say?

By
Ezra Klein

I know what the Democrats wanted out of the tax deal. Their opening position was that the Bush tax cuts for income over $250,000 should expire. Their eventual position was that stimulus was more important than the expiration of the the tax cuts for the wealthy, and so if Republicans were willing to hand over a bunch of stimulus, they could temporarily keep giving Warren Buffett a huge tax break.

I don't really know what their position is going into these spending negotiations. The Republicans want to cut federal spending at an annualized rate of $100 billion, which means cutting about $64 billion for the rest of the year. Democrats want to ... win the future? Simply keep the government from shutting down?

In a more normal world, the Democratic position would be that we're staring down 9 percent unemployment and it's too early for any fiscal contraction whatsoever. But that's not their position, at least not publicly. They want to make spending cuts, but somewhat less than the Republicans do. They want to protect investments for the future, but they haven't offered any benchmarks for how much investment we should be doing. They long ago gave up trying to push for further net stimulus. So when they sit across a table from the Republicans, either during this negotiation or the coming negotiations over the debt limit and the 2012 budget, what are they going to say? What does a policy win for the White House look like?

Avoiding a shutdown may be a win for the White House. It's not clear they would benefit from a shutdown in the same way as Clinton did. Polls notwithstanding, there is an appetite in the public for some spending cuts, at least in the abstract.

I think the White House would want a combination of avoiding a government shutdown, avoiding a level of cuts that's too damaging, and securing decent levels of funding for their priorities, while at the same time implementing some budget cuts that Republicans can trumpet to the tea party and that lets Obama argue he isn't just a big spending, big government liberal.

Problem is not much of that is something they can take to the public as a strong line.

"So when they sit across a table from the Republicans, either during this negotiation or the coming negotiations over the debt limit and the 2012 budget, what are they going to say?"

Perhaps Congressional Democrats will simply not sit across the table at all: the "Flee Party" moniker appears to be well-earned. Lack of message is an unsurprising progression, given that messaging over the past two years has been based upon pseudo-intellectualism: the supply of plausible pseudo-scholar-Democrats has been depleted.

Modifying the question to suit the circumstances, what happens when Democrats run out of unpopular, unworkable, unconstitutional hair-brained ideas? The result may be acceptance of the ideas of others.

Senator Obama, the candidate in Springfield:
"It was here we learned to disagree without being disagreeable – that it's possible to compromise so long as you know those principles that can never be compromised; and that so long as we're willing to listen to each other, we can assume the best in people instead of the worst."

I vehemently opposed the tax deal. The Dems negotiated away their major issue. If they still had that in hand, then a two year budget framework could be negotiated and the tax impact and spending would be wrapped into one deal.

"Polls notwithstanding..."! Except from the polls how do you know what the public has an "appetite" for? Focus on spending, or for that matter on the deficit, is strictly a Beltway meme. The public's appetite is for jobs and economic recovery.

Of course Obama is flat-footed on this, having never articulated a serious jobs agenda. The Republicans campaigned on "where are the jobs", until the election saved their own jobs. Then suddenly they claim that the public is worried about the deficit, which is quite simply a lie.

If the polls are notwithstanding as to what the public wants then we're just making it up.

If Democrats like Ezra are so worried about the 9% unemployment, why are they fighting so hard against the reforms being proposed in states like Wisconsin and Ohio to reign in public union employee costs?

Here's the rub...if the GOP governors in those states get their way, total compensation per employee will come down...but nearly everyone keeps their job.

If the labor unions get their way, per employee cost will continue to rise....and force governors, mayors, and county commissioners to start laying off employees to meet budgets.

Take Ohio for an example...say Kasich loses, unions win, and wages/employee continue to increase each year. To achieve balancing the budget, Ohio politicians will have to cut the public workforce 10%-12%. That means Ohio's current unemployment rate of 9.6% would jump back into double-digits at around 10.5%.

So, if liberals were really concerned about not doing anything that would negatively impact unemployment, they should get on board with the GOP-led reforms taking place in Wisconsin and Ohio that will help everyone keep their jobs, just at slightly less pay.

Otherwise, some of the public employees currently screaming at legislators 'shame! shame!' will soon enjoy the shame of the unemployment line if the unions win and they cut off their nose to spite their face.

Well, isn't there something to be said for ponying up for what we've already spent? I feel like the tax cuts at the beginning of the last decade followed by appreciable expansion in the spending that occurred in all Congresses and administrations since was like purchasing a new living room set, "no money down, no payments 'til 2011". Part of getting our house in order must involve addressing our *actual debt*, and I don't see how we can cut our expenses to the point where there are surpluses again (never mind the fact that the U.S. Congress at this point has never seen a surplus it hasn't wanted to refund). I think we owe it to ourselves as a nation to raise revenues to address past spending, if we want to be serious about this.

President Obama referred briefly to tax "loopholes" in his SOTU address, but Democrats really need to address tax "expenditures" in general. A general increase in tax rates is a very hard sell, but even some Republicans are amenable to limiting tax deductions. Democrats should insist on a dollar reduction in tax expenditures for every dollar that federal spending is reduced. The burden of deficit reduction can -- and should -- fall on those who can afford it. Targeted tax reform would have much less adverse impact on the economy then reductions in government spending.

Dems will try to limit further spending cuts, period, but probably should offer-up large cuts to what Simpson-Bowles and Schakowsky categorized as "tax expenditures." The administration just hasn't been as good as it should be at negotiating.

you are failing to realize the importance of demand in keeping employment high. cutting back wages for public sector employees may allow more of those workers to keep their jobs than they would otherwise but it still depresses demand enough to prevent the private sector from expanding and creating new jobs.

the whole austerity argument completely ignores the fact that we're suffering from a demand problem. people have less money to spend now than before the crisis and cutting back their consumption through further wage cuts only exacerbates the problem. there are plenty of historical examples to prove the austerity tendency as inherently damaging.

I think the CBO numbers indicate Obama et al. spent $200,000/job "saved or created." That's forgetting all the business investment macroeconomic disincentives, e.g., future tax increases, etc., increases in labor costs overall, etc., that are also part of that in and of itself and the various unemployment creating initiatives since 2006 (minimum wage increase, etc.); in other words, best case $200,000/job. This is the worst performance of a government in US history fiscally. It all was what Emanuel implied it was when he would not let a "crisis go to waste." It was Democrats paying off their constituents under the guise of stimulating the economy and creating jobs. Just because you spend money it does not mean you've created demand and thus jobs efficiently. You could spend all $1 trillion of the stimulus paying Bob Doe to build a statute in Central Park and he could buy gold with it and put it in his basement: 1 job, no demand (except for gold).

The Democrats HAVE to cut spending because they are already on the way out for being so horrible at managing the USA. The evidence is overwhelming, i.e., the Reagan and Bush tax cut approach to stimulating both demand and supply created jobs and soothed the economic downturn far better than this catastrophe.

Also great Sacramento Bee article; simply stated the public union system is a rigged system. The tragedy is that the school children, the typical public transportation passenger, the fire and criminal victims, etc. are the ones who suffer so the Democrats can get the cash they are so greedy to get.

We've seen this movie before--the Dems not really coming out with any specific plan but rather painting with a broad brush an ambiguous set of goals--now it's reasonable cuts, made with a scalpel, not a sledge hammer--we all know the script. The problem with this, it seems to me, is, first, that it leaves the Republicans an open field in which to make their case, however distorted, and the Dems have nothing specific with which to counter it. So the Repubs are free to say, well, we've got ideas--what about you? Don't you see the sky falling?

Obviously, the Dems have to deal with their internal split between the progressive and the McCaskill wing. But the second problem with their current stance is that they essentially contribute nothing to the conversation and so are ignored. They need to start making the case for the destructiveness of the Repub approach and to propose their own choices, whatever they may be. I was struck by the total absence of coverage in the media, esp. the network news shows, which still catch about 25 million views, of the reports, from Moody's, Goldman, and the CAP--not to mention Bernanke--on the impact of the Repub plan on unemployment. Who is out there speaking to this? Who is saying, No, Newt, no, Chris, Soc Sec really isn't the problem.

If the Dems don't seize the microphone now, before things heat up further, we can all prepare for Death Panels 2, coming to a theater near you. And then it will be too late.

That's what happens when voters reward obfuscation: the more transparent Party gets spanked and thus moves away from the clarity that voters punished them for. The tax deal benefited both from the existence of a clear political upside and the mass of lame duck holdovers-- neither of which exists in this case.

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